Jennifer Pae v. Fox Restaurant Concepts, LLC et al

Filing 49

MINUTES (IN CHAMBERS) Order DENYING Plaintiff's Motion to Remand to Superior Court (Docket No. 16) by Judge Dale S. Fischer: (SEE MEMORANDUM FOR SPECIFICS) (bp)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
MEMORANDUM

Case No.

Title

CV 16-6965 DSF (FFM)

Date

7/25/17

Pae v. Fox Restaurant Concepts, LLC et al.

Present:
 The Honorable

DALE S. FISCHER, United States District Judge
Debra Plato

Deputy Clerk

Court Reporter

Attorneys Present for Plaintiff

Attorneys Present for Defendants

Not Present

Not Present

Not Present

Proceedings:

(In Chambers) Order DENYING Plaintiff’s Motion to Remand
to Superior Court (Docket No. 16)

I. INTRODUCTION1
Defendants removed this case based on Class Action Fairness Act (CAFA)
jurisdiction. 28 U.S.C. § 1332(d)(2). Plaintiff moves to remand based on the “local
controversy” and “home state” exceptions to CAFA. 28 U.S.C. §§ 1332(d)(4)(A), (B).
Defendants are four limited liability corporations doing business in California.
Defendant Fox Restaurant Concepts, LLC (FRC) is the parent company of Defendants
FRC True Food SMP, LLC; FRC True Food SDFV, LLC; and FRC True Food NBFI,
LLC (collectively True Food LLCs). FRC is headquartered and incorporated in Arizona,
while each True Food LLC is incorporated in Arizona and operates a single restaurant in
California.

The Court deems this matter appropriate for decision without oral argument. See Fed. R.
Civ. P. 78; Local Rule 7-15.
1

MEMORANDUM

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
MEMORANDUM

On July 22, 2016, Plaintiff filed this putative class action in Los Angeles Superior
Court, alleging that Defendants routinely violated California labor laws relating to the
employment of their servers, waiters, and waitresses at restaurants in California. Compl.
¶¶ 1–2.
Defendants removed the action pursuant to CAFA. Plaintiff filed a motion to
remand, which Defendants opposed. Neither party disputed that the jurisdictional
requirements of CAFA were met, or any element of the local controversy or home state
exceptions, except the principal place of business of the True Food LLCs. The Court
therefore permitted Plaintiff to conduct jurisdictional discovery and provide supplemental
briefing limited to the principal place of business of each True Food LLC in order to
determine whether CAFA’s local controversy or home state exceptions applied.2 Plaintiff
filed a supplemental brief to its motion to remand (PSB), Dkt. 31, and Defendants filed a
supplemental brief in opposition (DSB), Dkt. 34. Plaintiff also requested an extension of
jurisdictional discovery, which the Court granted. Plaintiff filed a second supplemental
brief (PSSB), Dkt. 43, and Defendants filed their second supplemental opposition brief
(DSSB), Dkt. 46.
II. LEGAL STANDARD 
Federal courts have original jurisdiction over class actions where (1) “any member
of the class of plaintiffs is a citizen of a State different from any defendant” and (2) “the
matter in controversy exceeds the sum or value of $5,000,000.” 28 U.S.C. § 1332(d)(2).
There are two relevant exceptions to CAFA: the “local controversy” exception, 28 U.S.C.
§ 1332(d)(4)(A), and the “home state” exception, id. § 1332(d)(4)(B). If either exception
is satisfied, the Court “shall decline to exercise jurisdiction under [CAFA].” Id. §
1332(d)(4). These exceptions are not jurisdictional. See Visendi v. Bank of Am., N.A.,
733 F.3d 863, 869 (9th Cir. 2013) (holding that implicit in the statutory structure of (d)(4)
is that the court has jurisdiction, even though it must decline it). Plaintiff bears the
burden of proving one of these CAFA exceptions has been met, Serrano v. 180 Connect,
Inc., 478 F.3d 1018, 1024 (9th Cir. 2007), by a preponderance of the evidence,
Mondragon v. Capital One Auto Fin., 736 F.3d 880, 884 (9th Cir. 2013). The Court may
examine extrinsic evidence in determining the citizenship of the parties. See Coleman v.
Estes Exp. Lines, Inc., 631 F.3d 1010, 1016 (9th Cir. 2011) (holding that for the local

2

Because the supplemental briefing was limited to the principal place of business of each True
Food LLC, the Court will disregard arguments raised in the supplemental briefing that go to
other issues.
MEMORANDUM

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
MEMORANDUM

controversy exception courts can examine extrinsic evidence to determine the citizenship
of parties). In making factual findings under the local controversy exception district
courts may draw reasonable inferences from the facts in evidence. Mondragon, 736 F.3d
at 886.
III. DISCUSSION
The local controversy and home state exceptions to CAFA respond to concerns
“that class actions with a truly local focus should not be moved to federal court . . . .”
See Benko v. Quality Loan Serv. Corp., 789 F.3d 1111, 1119 (9th Cir. 2015) (citing
S.Rep. No. 109–14, 39, 2005 U.S.Code Cong. & Admin. News 3, 38). Both exceptions
are satisfied if the True Food LLCs are citizens of California. 28 U.S.C. §§
1332(d)(4)(A)(i)(II)(cc), (d)(4)(B). The parties agree that a limited liability corporation
is an unincorporated association for the purposes of CAFA. Under CAFA, an
unincorporated association “shall be deemed to be a citizen of the State where it has its
principal place of business and the State under whose laws it is organized.” 28 U.S.C. §
1332(d)(10). A corporation’s principal place of business is “the place where a
corporation’s officers direct, control, and coordinate the corporation’s activities.” Hertz
Corp. v. Friend, 559 U.S. 77, 91–92 (2010).
In order to determine the citizenship of a subsidiary, the Court looks to the
principal place of business of the subsidiary separate from that of the parent. See Danjaq,
S.A. v. Pathe Commc’ns Corp., 979 F.2d 772, 775 (9th Cir.1992) (holding that the
citizenship of parent company is not imputed to the subsidiary).3
Defendants have identified 36 individuals as the “senior-level employees” of each
True Food LLC, 30 of whom are based in Arizona. PSB, Kizirian Decl., Ex. 31 (Resp. to
Special Interrog.) at 4–26; PSSB, Kizirian Decl., Ex. 1, Alain Ané Dep. Defendants have
also identified the general managers of each True Food LLC, as the highest ranking
positions at each True Food LLC location. PSB, Kizirian Decl., Ex. 31 (Resp. to Special
Interrog.) at 3 (True Food SMP LLC); id., Ex. 32 at 3 (True Food SDFV LLC); id., Ex.

3

Danjaq left open the possibility of an exception to this rule when the subsidiary is the alter ego
of the parent. See Danjaq, 979 F.2d at 776 (noting that some courts had acknowledged the

exception but declining to reach the issue). Plaintiff has alleged that the True Food LLCs
are alter egos of the parent company FRC. Compl. ¶ 8. However, in the three rounds of
briefing on this motion neither party has argued that this exception, if it exists, should apply at
this stage. Because this is not a jurisdictional issue, the Court declines to address it sua sponte.
MEMORANDUM

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
MEMORANDUM

33 at 3 (True Food NBFI LLC). FRC owns “a few dozen restaurants,” and each
restaurant is a separate LLC. PSSB, Kizirian Decl., Ex. 1, Alain Ané Dep at 254:15,
255:13–19. Defendants do not dispute that these senior-level employees were employed
or paid by FRC. Instead, Defendants argue that these senior employees were jointly
employed by each of a few dozen restaurant LLCs owned by FRC, including the three
True Food LLCs. DSSB at 9. Plaintiff has submitted the wage statements for 29 of the
36 “senior-level employees” identified by Defendants. PSSB, Kizirian Decl., Ex. 2.
These wage statements are stamped with either the True Food or FRC logo. Only two
employees, Mike Wilcox and Taylor Domet, have a True Foods logo on their wage
statement and are based in Arizona. PSSB, Kizirian Decl., Ex. 2 at 33, 544. Based on the
wage statements and Defendants’ corporate structure, Plaintiff contends that it is
“extremely unlikely” that a business organized as dozens of separate LLCs would have
its senior employees working for the parent company and each individual LLC. PSB at
3. Plaintiff argues that these senior-level employees all work solely for FRC and make
decisions on its behalf. PSSB at 10. Therefore, in Plaintiff’s view the most
consequential decisions being made by the True Food LLCs can only be made by its
general managers, who are based in the California restaurant locations. Id. But Plaintiff
provides no convincing support for her position – and her complaint supports
Defendants’ position. She alleges the wrongful conduct was committed by “Defendants.”
Compl. at ¶ 2. She provides no explanation for why or how three separate locations
would commit identical wrongful acts if independent general managers control
management policies, etc. Indeed, she alleges that FRC “exercised control over the
operations” of all three locations to the degree that those locations were agents of FRC.
Compl. ¶¶ 7–8.
Though the Court agrees that “joint employment” is not a particulary unusual
practice, there is little else in the record beyond conclusory statements that any seniorlevel employees identified by Defendants actually work for each restaurant’s respective
LLC.5 Nor is there specific evidence that they direct, control, or coordinate any activity
by the True Food LLCs. But there is also no evidence that the general manager of each
restaurant is a “high-level officer” of the individual LLC who controls the respective
True Food LLC. The only evidence in the record about the general manager position is
that it is “the most senior ranking position” at each True Food LLC restaurant location.
E.g., PSB, Kizirian Decl., Ex. 31 (Resp. to Special Interrog.) at 3 (True Food SMP LLC).

4

The Court cites to the ECF pagination of the wage statements.
It is not clear that “joint employment” should even be considered in the context of determining
the principal place of business.

5

MEMORANDUM

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
MEMORANDUM

This is not enough for the Court to find that each general manager directs, controls, or
coordinates the activities of the LLC, or that the restaurant location also serves as the
LLC’s headquarters. The Court has no evidence before it on such basic questions as the
duties or powers of the general managers, who the board members of each True Food
LLC are, who can hire and fire the employees of each True Food LLC, who has the
authority to sign contracts on its behalf, who sets policies concerning wage and hour
issues, and who controls resources, food offerings and preparation, and management.
Indeed, Plaintiff alleges that the latter matters are controlled by FRC. Compl. ¶ 7.
Plaintiff has therefore failed to meet her burden to establish the True Food LLCs are
California citizens.6
Plaintiff’s motion to remand is denied.
IT IS SO ORDERED.

Plaintiff has also filed two requests for judicial notice. RJN, Ex. 2–4, Dkt. 16–2; Second
RJN, Ex. 1–30, Dkt. 31–1. Because the “evidence” does not meet Plaintiff’s burden, the
Court need not rule on the request.
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MEMORANDUM

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